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The Government has offered good news to people who withdrew savings from ISAs held at Northern Rock during the bank's recent crisis.
The Treasury is to allow customers to re-deposit their money into cash ISAs with any provider, restoring tax advantages that were lost when they made their withdrawals.
This concession applies to funds taken out of Northern Rock ISAs between 13 September and 19 September inclusive. Those wishing to restore their lost cash ISA tax advantage must, by 5 April 2008, either:
- return their funds to a Northern Rock ISA, or
- obtain from Northern Rock a certificate for the amount of cash ISA savings withdrawn between 13 and 19 September, and present this to a new cash ISA provider when depositing the money.
There is an exception: if current year subscriptions already exceed £3,000, then the amount that can be reinvested is limited to comply with the £3, 000 overall annual subscription limit.
For example, £15,000 was withdrawn from a Northern Rock cash ISA on 15 September. This included £2,500 subscribed in May 2007. The investor has subscribed £2,000 to another cash ISA in 2007-08 (for instance, using the funds withdrawn). As the overall subscription limit for 2007-08 would be exceeded by £1,500 if the full amount was re-deposited, the investor can only re-deposit £13,500 (i.e. £15,000 minus £1,500).
HMRC will monitor subscriptions made and contact investors who exceed the limits.
Individuals wishing to make deposits under the terms of this announcement will receive a certificate from Northern Rock showing details of the total amount withdrawn from the ISA and the date on which the withdrawal was made.
The current ISA transfer rules remain unchanged for all other situations, so anyone wishing to transfer a current ISA from one provider to another must ensure that this is done directly between the providers without the first account being closed and a second one opened.
